Kenneth Cole Productions Reports Third Quarter EPS of $0.31 vs. $0.11 Last Year

NEW YORK, Nov. 2, 2011 /PRNewswire/ -- Kenneth Cole Productions, Inc. (NYSE: KCP) today reported financial results for the third quarter ended September 30, 2011.  The Company reported that net revenues increased by 7.5%, operating income increased 157% to $5.9 million versus the prior year's level of $2.3 million, and net income per fully-diluted share increased by 182% to $0.31 versus $0.11 in the year-ago period.

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Kenneth Cole, Chairman and Chief Creative Officer, commented, "I am pleased that we are making steady progress in many areas and am confident in our management team's ability to move the business forward and execute our vision  to become the international standard for New York style and social conscience."

Paul Blum, Chief Executive Officer, commented, "We are now implementing specific strategic initiatives to improve our product and the effectiveness of our marketing.  We are pleased to have generated both sales growth and an increase in profitability during the quarter.  We are energized by this traction and expect ongoing gradual progress."

Net revenues in the third quarter increased 7.5% to $128.0 million versus $119.0 million in the third quarter last year.  Wholesale revenues were up 27.5% to $79.7 million versus the year-ago period, driven by the launch of Kenneth Cole New York women's sportswear and increased doors in Reaction men's sportswear.  Consumer Direct revenues decreased 18.8% to $36.5 million versus the year-ago period due to the closing of unproductive full-priced stores and a comparable store sales decline of 10.1%. Licensing revenues in the third quarter improved approximately 2% to $11.8 million versus $11.5 million in the year-ago period.  Excluding the transition of Kenneth Cole New York women's sportswear to a wholesale business, licensing revenues would have increased 6.6%.

Gross margin declined 480 basis points to 37.7% versus the third quarter last year.  This decline was anticipated, resulting primarily from the combination of higher sourcing costs and a substantial mix shift in revenues.  Wholesale, which operates at a lower gross margin rate than retail, grew to  62.3% of total revenues versus 52.5% a year-ago.

SG&A, as a percentage of net revenues, in the third quarter decreased to 33.1% from 40.6%, an improvement of 750 basis points over the year period-ago period.  This improvement, which more than offset the decline in gross margin, was primarily the result of the elimination of excess overhead related to unproductive stores closed in prior periods, ongoing focus on cost efficiencies, and leverage achieved on double digit wholesale growth.

The Company's balance sheet remained strong at September 30, 2011 with $39.1 million in cash and no long-term debt.  Inventory decreased slightly to $50.9 million versus the prior year's level of $51.6 million.  In addition, the Company repurchased 102,500 shares of its stock for approximately $1.2 million during the quarter.  This leaves approximately 2.8 million shares available for repurchase under its existing authorization.

The Company also announced today it signed an exclusive license with Reliance Brands Limited in India.  The license will encompass the opening of Kenneth Cole New York retail stores and the distribution of the Company's product in premium department stores.

Fourth Quarter Guidance

The Company expects to report fourth quarter sales growth of mid-single digits and earnings per fully-diluted share on a GAAP basis of $0.37 to $0.39 versus the prior year loss of ($0.15).   The Company notes that there is no provision for federal taxes in its GAAP guidance.

About Kenneth Cole Productions, Inc.

Kenneth Cole Productions, Inc. designs, sources, and markets a broad range of footwear, handbags, apparel and accessories under the brand names Kenneth Cole New York, Kenneth Cole Reaction, and Unlisted, as well as footwear under the proprietary trademark Gentle Souls.  The Company has also granted a wide variety of third party licenses for the production of men's, women's and children's apparel as well as fragrances, watches, jewelry, eyewear, and several other accessory categories.  The Company's products are distributed through department stores, better specialty stores, company-owned retail stores and its e-commerce website.  Further information can be found at http://www.kennethcole.com/ .

Forward Looking Statement Disclosure

The statements contained in this release, which are not historical facts, may be deemed to constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Actual future results might differ materially from those projected in such statements due to a number of risks and uncertainties, including but not limited to, demand and competition for the Company's products, the ability to enter into new product license agreements or to renew or replace existing product licensee agreements, changes in consumer preferences or fashion trends, delays in anticipated store openings, and changes in the Company's relationships with retailers, licensees, vendors and other resources.  The forward looking statements contained herein are also subject to other risks and uncertainties that are described in the Company's reports and registration statements filed with the Securities and Exchange Commission.

SOURCE Kenneth Cole Productions, Inc.